Type of leverage:
Company's finance manager tests three types of leverages:
A. Operating leverage is the percentage change in earnings prior to interest and tax divided by percentage change in the sale. When company is charging fixed cost, the operating leverage states the EBIT will more than sale since due to rising sale of fixed cost per unit will reduce and it will raise EBIT more than sale.
Formula:
Operating Leverage = Percentage change in EBIT / Percentage change in Sale
This leverage is very obliging for finance manager since, if operating leverage is greater than or assume it is two then it means when sale will raise 100% then earning will raise 200%. At this time, finance manager can obtain additional loan for rising the earning of shareholders. B. Financial leverage: It is the second kind of leverage. Financial leverage is termed as trading on equity. When any company's finance manager recognizes that company's return on investment is greater than interest on loan or borrowing obligation. At this time, whenever company requires additional money, then finance manager acquires its loan and bought the asset from similar loan. Therefore, any method in which any asset is purchased with loan and trying to raise EPS, then this is termed as financial leverage.
Formula for computing financial leverage:
= Percentage change in Earning per share / Percentage change in earnings before interest and tax = % change in EPS / % change in EBIT
This formula describes the relationship between % change in EPS and % change in EBIT and subsequent to deep study of this financial leverage, finance manager judges to get suitable loan for buying assets.
C. Combined leverage:
This is the product of operating leverage and financial leverage.
Combined leverage = Operating leverage X financial leverage
= % change in EBIT / % change in sale X % change in EPS / % change in EBIT
→ High operating and high financial leverage combination is much high risky for business.→ Excellent combination is that in which lower operating with high financial leverage.
Latest technology based Finance Online Tutoring Assistance
Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Finance help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Finance, project ideas and tutorials. We provide email based Finance help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Finance. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Finance Homework help and assignment help services. They use their experience, as they have solved thousands of the Finance assignments, which may help you to solve your complex issues of Finance. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.
tutorsglobe.com general morphological structure assignment help-homework help by online leishmania tutors
Transfer pricing has supposed lot of significance today. For performance evaluation of a division or department it is one of the significant tools in the hands of management.
build up the layout of a wave winding for a 3 phase comprising 4 pole ac machine and 24 slots. there are 2 coil sides per slot.
Systematic Classification of Protozoa tutorial all along with the key concepts of The Flagellates, The Zooflagellates, The Amoebas, Nutrition of Amoeba, The Sporozoa, The Ciliates and Other Ciliated Protozoa
double indicator method tutorial all along with the key concepts of experiment, requirements, procedure, problem, results, treatment of results
Polymers as Fibers tutorial all along with the key concepts of Intermolecular forces in fibers, Natural and synthetic fibers, Hydrogen bonding in crystallite of nylon, van der Waals forces
tutorsglobe.com systematics assignment help-homework help by online biodiversity tutors
In the integrated accounting system, various set of accounts within cost accounting and financial accounting systems are not maintained.
Energy Metabolism tutorial all along with the key concepts of Metabolism-Energy for Life's Work, Free Energy, Oxidation, Reduction and Energy Content, Compounds Involved in Energy Metabolism, Nucleoside Triphosphates
www.tutorsglobe.com offers properties of amines homework help, properties of amines assignment help, online tutoring assistance, organic chemistry solutions by online qualified tutor's help.
tutorsglobe.com reabsorption in henles loop assignment help-homework help by online excretion tutors
Theory and lecture notes of Probability Distributions all along with the key concepts of Probability Functions, Mean, Variance, Standard Deviation, Random Variable, Multinomial Distribution and Poisson Distribution. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Probability Distributions.
A business is formed to improve the wealth of its owners. This might come like a surprise because there are other objectives that a business might follow that are associated to the requirements of others related with the business.
www.tutorsglobe.com offers substitution of (x) homework help, substitution of (x) assignment help, online tutoring assistance, organic chemistry solutions by online qualified tutor's help.
Preparation and Reactions of Epoxides tutorial all along with the key concepts of Methods of Formation of epoxides, Chemical Properties of Epoxides, Base catalyzed cleavage, Reaction with Grignard reagent, Reduction of Epoxides and Uses of Epoxides
1940936
Questions Asked
3689
Tutors
1449237
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!